An industry-wide slowdown in subscription growth
It’s not just Netflix that’s stalling out; lots of publishers are struggling to maintain their early subscriber growth numbers.
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We may be witnessing an industry-wide slowdown in subscription growth
I received two separate questions that are somewhat similar in subject matter.
The first comes from Esther Kezia Thorpe
Netflix has contracted in subscribers for the first time, and certainly here in the UK a lot of people are starting to think about trimming their entertainment spending as fuel, energy etc. are spiraling (Brexit, Suez Canal, Ukraine war etc). I assume something similar is happening in the US. …
… Is the cost-of-living subscriber crunch something publishers should be concerned about, and what else can they do to keep the relationship with readers alive aside from subs?
The second comes from Jeff Perry
Given the failure of CNN+ and decline in Netflix subscribers are subscription-based platforms doomed?
First, I want to issue the caveat that I’m not an economist and certainly not an expert on inflation.
Now that I’ve gotten the necessary disclosures out of the way, I think the media’s singular obsession with inflation has painted an unrealistic picture of the average person’s economic situation. While yes, inflation is at record highs, we’ve also seen record high job growth and rising wages. Depending on how you squint at it, one could argue that wage growth is being outpaced by inflation, but you still have to account for said wage growth when calculating the impact of inflation.
So I’m not sure that inflation is hurting subscription business models all that much, especially since the marginal costs of serving a new digital subscriber are relatively low. If you have to print 10,000 extra copies of a newspaper, then you’re subjected to the rising costs of ink and paper, but it really costs you very little to service 10,000 additional digital subscribers.
That being said, I do wonder if we’re witnessing an industry-wide slowdown in subscription growth, and not because of inflation or “subscription fatigue” or anything like that. It’s not just Netflix that’s stalling out; I’ve seen reports that everyone from the Washington Post to The Atlantic are struggling to maintain their early subscriber growth numbers.
I think the reason behind this might be simple: it’s been a few years since most publishers launched their paywalls, and they’ve simply run out of low-hanging fruit. Once they converted all their superfans, they then had to begin the long, difficult task of bringing in new superfans, something that’s notoriously difficult to do when your casual readers keep hitting a paywall long before they’re ready to convert. Ironically, this has led to some publishers actually tightening their paywalls by reducing the number of free metered stories, thereby cracking down on “freeloaders.” The downside is that this strategy leads to a shrinking sales funnel as people start bouncing off your website because they’re not ready to pay.
It’s probably time for many publishers to admit to themselves that the paid subscription model was never going to be the silver bullet that would completely reverse all the trends that gutted many legacy news outlets. For a time, we looked at the subscription success stories coming from places like The New York Times and Wall Street Journal and really wondered if we were entering a new era in which reader revenue could single handedly save us from declining ad rates. And while subscriptions certainly did help publishers find a more stable footing, it turns out that the future of media still heavily depends on diversified business models, i.e., digital advertising.
That’s probably why we’re seeing more and more publishers switch to looser paywalls. The Globe & Mail created an AI that predicts when a reader is most likely to convert into a paid subscriber. Gordon Edall, the project manager who helped build the AI, told me in an interview that some readers can consume dozens of articles without ever hitting a paywall. The basic logic here is that it’s better to keep serving a reader with more ads than it is to bounce them off the website.
Several publishers are eschewing paywalls entirely. Digiday published a good rundown of these experiments, which range from Vox asking readers for donations to The Guardian reaching 1 million recurring payments. The newest entrant to this cohort is Quartz, which recently removed its website paywall. Here’s how CEO Zach Seward explained the logic of the move:
Last year, Quartz was seeing “plenty” of new members convert simply to read an article they searched for specifically, but then quickly unsubscribed. “This became a distraction from where we see the real growth, and that’s in the Quartz loyal membership and the more vertically-oriented subscriptions. We don’t want to be dealing with the one-and-done subscribers,” Seward said.
Instead, Quartz would be “better off” serving them an ad or getting them to become an email subscriber to start the journey of converting them to a paying member down the line, he said. More than half of Quartz’s existing paying members have been doing so for two years.
When I wrote about Quartz in June 2021, a spokesperson at the company told me that it had 27,000 paying members. That recent Digiday article places its paid membership at 25,000. That’s a clear sign that its subscription growth had stalled out, and I don’t think it’s alone in that regard. As I’ve written before, subscription economics are pretty brutal, and it’s only a matter of time before churn eats into all of your growth. When it does, you have to be ready with Plan B.
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My take on Elon Musk buying Twitter
The next question comes from Jeff Perry
Should we, as creators, be worried about the Twitter deal happening?
By the Twitter deal, I assume you mean Elon Musk’s successful bid to buy the company? I generally try to avoid culture war discourse in this newsletter, but since you asked…
Honestly, I think both sides are being a bit hyperbolic and histrionic in their responses to this news. Chances are, not much will change in the short term if this deal goes through, and it’s important to remember that even though Musk has an asshole persona on Twitter, at the end of the day he’s your standard Center Left billionaire, probably not all that different from a Jack Dorsey or a Jeff Bezos.
Depending on whether you’re on the Left or the Right, you’re perhaps fearful/hopeful that Musk will do away with most of the content moderation policies that Twitter established over the past half decade, and that he might even let Donald Trump and his hoards of MAGA trolls back onto the platform.
I don’t pretend to know much about the internal bureaucracy of Twitter, but my general sense is that tech workers tend to be overwhelmingly liberal and generally supportive of the moderation policies that are now common on social platforms. Does Musk really want to go to war with that constituency? Consider for a moment what’s been going on over at Facebook these last few years:
Employee morale has been extremely low, partly due to clashes over moderation between its rank-and-file-employees and senior executives. Because of that, not only does it have trouble recruiting top talent, but its workers constantly leak damaging information to the media.
Facebook has been subjected to all sorts of regulatory scrutiny, especially in Europe.
Apple used public antipathy toward Facebook as ammunition to ram through iOS privacy rules that wiped out billions of dollars in Facebook revenue virtually overnight.
User growth has pretty much stalled out as younger users grew increasingly alienated from the platform. Just in my own age cohort, I know so many people who hardly log into the Facebook app, and huge portions of Gen Z don’t even maintain a presence there.
As a result of all these trends, Facebook’s stock price has cratered over the past year.
At the end of the day, Elon Musk will sink $44 billion into the purchase, and he’s already running several other companies. How much energy does he have to alter Twitter’s entire trajectory, and how much risk is he willing to take on? I think he’ll find that it’s much easier to simply shitpost to his Twitter account than it is to steer the company in a radically different direction.
What’s a good newsletter click-through rate?
From Tim Benjamin
For publishers of newsletters, what’s a good click-through rate?
So, by click-through rate, I’m assuming you mean the percentage of newsletter openers who click on at least one link within the newsletter?
It really depends on what kind of newsletter you send out. If you’re just aggregating links to web articles, then your click-through rate should be pretty high, somewhere north of 20%. If you have a self-contained editorial newsletter that’s meant to be consumed in the inbox, then a lower click-through rate is more acceptable. I think my average is hovering around 10%.
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A profile of one of the few social media stars to cross over into genuine A-list stardom. [Rolling Stone]
"Opinion and its focus on multi-media projects are among the best retention vehicles for the [New York Times’s] subscription, said Kathleen Kingsbury, opinion editor of the Times." [Axios]
So CNN's team projected that it would reach 30 million paying subscribers for CNN+. That's three times the current subscriber base for The New York Times. Yeah right! [Axios]
These NFT gimmicks are already starting to feel old. The vast majority of publishers are not going to see significant revenue from this kind of stuff. [Digiday]
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Simon Owens is a tech and media journalist living in Washington, DC. Follow him on Twitter, Facebook, or LinkedIn. Email him at email@example.com. For a full bio, go here.